Last March the state-backed British Business Bank began lending to small businesses through peer-to-peer lending platform Funding Circle. The Bank has exhausted its initial £20 million funding tranche, and has now announced that it will lend a further £40 million.

The money will be made available through Funding Circle, along with cash from private investors. The British Business Bank provides the final 10 per cent of funding to each borrower, with the first 90 per cent offered by the private sector.

The first £20 million tranche was lent to a total of more than 2,000 businesses across the country and, according to Funding Circle, helped to create an estimated 6,500 jobs. The British Business Bank is designed to bring together public and private sector funds in an effort to boost economic growth.

Funding Circle is one of the most prominent peer-to-peer (also known as crowdfunding) lending platforms in the UK. The company says it has facilitated more than £227 million in loans so far.

Crowdfunding is becoming an increasingly popular funding method. Supporters claim that crowdfunded loans can offer better terms and lower interest rates, while some business owners prefer not having to deal with the banks. Read more in our small business finance guide.